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Annual Financial Statements
Depreciation of tangible fixed assets (other than Land which are not
depreciated) is calculated using the straight line method over their
useful life, as follows:
Buildings
25-35 years
Mechanical equipment
4-30 years
Vehicles
4-10 years
Other equipment
4-7 years
The residual values and useful economic life of tangible fixed assets
are subject to reassessment at each balance sheet date. When the
book value of tangible fixed assets exceeds their recoverable amount,
the difference (impairment) is immediately booked as an expense in
the income statement.
Upon sale of the tangible fixed assets, any difference between the
proceeds and the book value are booked as profit or loss to the re-
sults. Expenditure on repairs and maintenance is booked as an ex-
pense in the period they occur.
Self-constructed tangible fixed assets constitute an addition to the
acquisition cost of tangible assets at a value that includes the direct
cost of employee’s salaries (including the relevant employer’s contri-
butions), the cost of materials used and other general costs.
3.6 Intangible assets
The intangible assets include Goodwill, the rights of use of Property,
plant and equipment, software licenses, licenses for the production,
installation and operation of renewable energy assets and thermal en-
ergy assets, the environment rehabilitation expenditure and borrowing
costs.
Goodwill on Acquisition:
is the difference between the asset’s ac-
quisition cost and fair value and the net assets of the subsidiary /
associate company as at the acquisition date. During the acquisition
date, the company recognizes this surplus value, emerged from ac-
quisition, as an asset and presents it in cost. This cost is equal to the
amount by which the acquisition cost exceeds the company’s share in
the net assets of the acquired company.
After the initial recognition, the surplus value is valued at cost less any
accumulated impairment losses. The surplus value is not depreciated,
but is reviewed on an annual basis for possible decrease in its value
(impairment), if there are events that indicate such a loss according
to IAS 36.
Goodwill is allocated to cash-generating units for the purpose of im-
pairment testing. A cash generated unit is the smallest identifiable
group of assets generating cash inflows independently and repre-
sents the level used by the Group to organise and present each activi-
ties and results in its internal reporting. Impairment is determined for
goodwill by assessing the recoverable amount of the cash-generating
units, to which the goodwill relates. Where the recoverable amount
(typically the value in use) of the cash-generating units is less than
their carrying amount an impairment loss
is recognised. Impairment losses relating
to goodwill cannot be reversed in future
periods. The Group performs its annual
impairment test of goodwill as at 31 De-
cember.
In the case where acquisition cost is less
than the company’s stake in the acquired
company’s net assets, the former recalcu-
lates the acquisition cost and valuates the
assets, liabilities and contingent liabilities
of the acquired company. Any difference
prevailing after the recalculation is recog-
nized directly in the income statement as
a profit.
Software:
Software licenses are valued in
cost of acquisition less accumulated de-
preciation. Depreciation is calculated us-
ing the straight line method during the as-
sets’ useful life that range from 1 to 3 years.
Production, Installation and Operation
Licenses of Renewable Energy Assets
and Thermal Energy Assets:
The
different types of licenses entitles the
group either with the right to construct an
energy asset or the right to produce and
sell energy. Current market conditions
provide adequate evidence about the
recoverable amount of such licenses.
Therefore the Group has recognized
licenses as intangible assets at fair value
less depreciation and less any provision for
impairment. The Group runs impairment
tests on a yearly basis using the following
methodology:
i)
Attach possibility factors according to
management estimation regarding the
construction of assets under license
ii)
Runs Discounted Cash Flows (DCF)
methodology using assumptions prevail-
ing at the energy market. The period re-
garded by the management for provisions
exceeds the five years encouraged by IAS
36 as, especially for the renewable energy
assets, there is satisfactory visibility for a
substantially longer period.
iii)
The final recoverable amount is calcu-
lated for a total portfolio of either renewable
or thermal energy assets by multiplying the
overall possibility factor with the outcome
of the DCF valuation.
iv)
Finally, the Group compares the re-
coverable value calculated to be the val-
ue-in-use of the assets with their carrying
amounts. When the recoverable value is
less than the carrying amount an equal impairment provision is
charged to the income statement.
Legal rights to explore mines:
The legal rights to explore
mines concern rights that the group has acquired mining min-
eral reserves in several geographical areas. In cost of the min-
ing rights, apart from nominal value of the rights, any cost that
relates to the initial evaluation of the rehabilitation cost of the
area where work has been done, the commitment of the Group
either during the acquirement of the right or as a result of its use
for a certain time period. The depreciation time period that is
adopted by the Group does not exceed 10 years.
Right of Use of Tangible Assets:
Rights of exploitation of tan-
gible assets that are granted in the frames of conventions of
manufacture of work (compensative profits) are valued in cost
of acquisition, which equals their fair value at the date of their
concession, less accumulated depreciation. Depreciation is
calculated using the “production units method”.
Research and Development Expenses:
Research and De-
velopment expenditures are recognized as expenses when they
are realized. The expenses which arise from the developing
programs (related to the design and the test of new or improved
products) are capitalized if it is possible to produced future eco-
nomic benefit. The other development expenditures are booked
as an expense in the results when they are realized. Previous
years’ development expenditures recognized as expenses,
can not be capitalized in the future fiscal years. The capitalized
development expenses are depreciated from the beginning of
the product’s economic life using the straight line method dur-
ing the period of the product’s future economic benefits. The
Group’s depreciation period doesn’t exceed the 5 years.
Land Stripping & Restoration expenses :
Land Stripping &
Restoration expenses are capitalized and amortized using the
unit of production method.
Borrowing costs: Borrowing costs that are directly attributable
to the acquisition, construction or production of a qualifying as-
set shall be capitalized as part of the cost of that asset. The
amount of borrowing costs eligible for capitalization shall be
determined in accordance with IAS 23.
3.7 Impairment of Assets
Assets with an indefinite useful life are not depreciated and
are subject to an impairment review annually and when some
events suggest that the book value may not be recoverable any
resulting difference is charged to the period’s results. Assets
that are depreciated are subject to an impairment review when
there is evidence that their value will not be recoverable. The re-
coverable value is the greater between the net sales value and
the value in use. An impairment loss is recognized by the com-
pany when the book value of these assets (or cash generating
unit- CGU) is greater than its recoverable amount.
Net sales value is the amount received from the sale of an asset
at an arm’s length transaction in which par-
ticipating parties have full knowledge and
participate voluntarily, after deducting any
additional direct cost for the sale of the as-
set, while value in use is the present value
of estimated future cash flows that are ex-
pected to flow into the company from the
use of the asset and from its disposal at
the end of its estimated useful life.
3.8 Important accounting
decisions, estimations and
assumptions
The compilation of financial statements
according to IFRS requires the manage-
ment to make decisions, perform estima-
tions and use assumptions that affect the
amounts presented in the financial state-
ments, the assets, liabilities, income and
expenses. The actual results may differ
due to such estimations. Estimations are
continuously enhanced and are based on
historical data and other factors, such as
expectations for future events expected to
realize under current conditions.
3.8.1 Accounting decisions
During the implementation procedure for
accounting policies, decisions are made
by the management, which relate to the
following:
• Classification of investments
Management classifies Financial assets in
the scope of IAS 39 based on their nature
and their characteristics at the following
four categories:
• financial assets at fair value through
profit and loss,
• loans and receivables,
• held-to-maturity investments, and
• available-for-sale investments.
